The relationship between pension scheme administration and ...

Introduction and Executive SummaryGood governance matters and effective administration is atthe heart of any well run pension scheme.Without the right people, systems and controls to ensure itssmooth operation, a pension scheme is destined to delivera poor member experience, the sponsoring employer willbe funding a scheme that is not valued by employees, andresolving complaints and disputes will become a full timeoccupation for the trustees or managers.It is against this backdrop that we, JLT Employee BenefitsLimited, agreed to collaborate with The PensionsManagement Institute on a continuing research projectto explore the relationship between pension schemeadministration and effective scheme governance.We have already published the results of a ‘mini-survey’ intopension schemes and record-keeping. This followed thepublication of The Pensions Regulator’s guidance in thisarea and a reminder of the survey results is provided in theAppendix.The report that follows sets out and provides an analysisof the results of our main survey, which was conductedin the last quarter of 2010 and completed by over 250respondents.It is a very timely paper with the Regulator continuing its‘governance mission’ and reminding schemes, only lastmonth (February), of the importance of administration(1).The issue of its latest discussion paper on “Enabling GoodMember Outcomes”(2) further evidences the importancethat the Regulator attaches to pension scheme governance.The main survey was broken down into a number ofdistinct areas, looking at current practices and howthese may have to change in the future. It covers dataquality, communication, decumulation, investments andprospective auto-enrolment requirements.Key findings across these disparate, but all equallyimportant, areas include:• almost one-third have not agreed targets forstandards of data and a deadline for achievingthose targets;• nearly 40% of schemes do not provide memberswith access to any pension modelling tools (e.g.retirement benefit calculators) to support theirdecision making process;• when communicating with members about theirretirement options, 81% of schemes tell membersabout the open market option (OMO) but only30% facilitate access to advice for members onthe OMO;• in terms of the pension scheme admission, over60% of schemes still require members to apply tojoin;• many employers have still to make up theirminds when it comes to choosing a qualifyingpension scheme for discharging their prospectiveobligations in respect of the auto-enrolment andNEST requirements; and• in terms of the, potentially substantial, costs ofcomplying with auto-enrolment, nearly 85% ofschemes have not quantified both the direct(contribution) and indirect (ancillary) outlay that thereforms will entail.This small sample of findings is, of itself, interesting andrelevant. The full results which follow are equally instructiveand sometimes surprising. Our analysis of them clearlydemonstrates that, in terms of many pension schemeadministration arrangements, there is still work to do.1. http://www.thepensionsregulator.gov.uk/press/pn11-05.aspx2. http://www.thepensionsregulator.gov.uk/press/pn11-03.aspx1